The Health Ministry has for the past two years been purchasing drugs from the open market at retail prices for its extensive Central Government Health Services network instead of the earlier practice of sourcing from smaller drug companies at highly-discounted rates.

In separate petitions to Prime Minister Atal Behari Vajpayee and Health Minister Dalit Ezhilmalai recently, the All-India Government Pharmaceuticals Suppliers' Association (AIGPSA) has called for their urgent intervention to save them from financial ruin caused by the discriminatory policies of health ministry officials, who, they say appear to be favouring the multinational pharmaceutical companies.

The manufacturers have alleged in their petitionthat the loss to the exchequer from this shift is estimated to be more than Rs 50 crore as the Government health network has been purchasing medicines at maximum retail prices from the open market instead of procuring them from small-scale manufacturers at much reduced rates. What is worse there is no check on the quality of these purchases as most of the drugs are outside the ministry's Drug Price Control Order (DPCO).

Sources in the Health Ministry admit that small-scale manufacturers had till recently been supplying around 80 per cent of the requirements of various central and state government institutions, including the CGHS dispensaries, hospitals, paramilitary forces and central jails.

The established practice for the ministry was to short-list essential medicines to be supplied to Government hospitals and other organisations. The list of drugs, known as `Vocabulary of Medical Stores' (VMS), was drawn up by a panel of medical experts including officials from the Health Ministry after evaluatingvarious pharmaceutical units for the efficacy of the products, quality control and their technical knowhow.

The procurement and distribution of the medicines was done through a chain of Government medical store depots located in Guwahati, Calcutta, Hyderabad, Chennai, Mumbai, Karnal and Delhi.